1

TEACHING PLAN FOR

PRICING POLICIES


1. Basic description of the course

Name of the course: Pricing Policies
Profile: Marketing Market Research
Academic year: 2013-2014
Term: 1st
Degree / Course: Bachelors Degree in International Business and Marketing
Code: 40114
Number of credits: 4
Total number of hours committed: 100
Teaching language: English
Lecturer: Tomislav Rimac
Timetable:

GROUP 1 (Plenary Session)
Mondays, 13.00 15.15



GROUP 1A (Seminar Session)
Thursdays, 13:00 13:55




OFFICE HOURS: Mondays, 12:00 13:00 and by appointment


2. Presentation of the course

Pricing is the moment of truth all of marketing comes to focus in the pricing
decision. (Raymond Corey)

Price setting is probably the most crucial of all marketing mix decisions. It involves
an understanding of both supply side factors (e.g. costs) and demand side factors
(e.g. consumer willingness to pay). While traditional approaches to pricing theory
have revolved around an economic and financial framework, a broader and more
pragmatic view entails a comprehensive understanding of the demand side; both at
the level of individual customer values, and the more aggregate level of price
sensitivities of the market. In this course, we will approach the pricing decision as
an intersection of economic, strategic and behavioral considerations. Using
industries as diverse as wireless communication, pharmaceutical, medical services,
industrial products and consumer packaged goods, we will study economic and
behavioral approaches to pricing, dynamic of pricing, value pricing, price
customization, price bundling and multi-part tariffs, menu costs and price
2

stickiness, price presentation strategies, sales promotions, and the effect of pricing
formats on consumption and customer value.

The prerequisites for this course are solid knowledge of basic marketing,
microeconomics, managerial accounting, and managerial finance concepts acquired
in the Business Marketing and Microeconomics courses or in equivalent courses.
Students are expected to be familiar with topics such as laws of demand and
supply, fixed and variable costs, price elasticity, net present value, etc. Although
many of these topics will not be officially discussed during the class, students will
be provided with refresher power point slides that they can review in the
preparation for the classes. Familiarity with some advanced managerial finance
(e.g., options) and competitive strategy (e.g., game theory) concepts is beneficial,
though not obligatory.

Although this course has a significant QUANTITATIVE component, required
mathematical skills do not go beyond basic calculus (e.g., derivative of a linear
function). However, solid control of the basic algebra is mandatory. Fluency in use
of EXCEL software application is mandatory. Students MUST bring their
laptops to every class.


3. Competences to be achieved in the course

General competences:

Instrumental competences

G.I.2. Ability to relate concepts and
knowledge from different areas.
G.I.3. Ability to organize and plan.
G.I.5. Ability to take decisions in complex
and changing situations.
G.I.8. Oral and written competence in
communicating in English.

General personal competences

G.P.1. Ability to adapt and work in and
lead international, multicultural,
interdisciplinary, competitive, changing
and complex groups.

Generic systemic competences

G.S.4. Entrepreneurial ability.
G.S.7. Promotion of and respect toward
multicultural values: respect, equality,
solidarity, commitment.
G.S.8. Promotion and respect for gender,
environmental and safety at work issues.
Specific competences:

Disciplinary competences

E.D.8. Analyze the organization of
businesses based on economic
principles that make it possible to
identify the most determining factors in
results.

Professional competences

E.P.2. Ability to analyze economic and
market indicators when taking
decisions within the organization.
E.P.5. Ability to take strategic business
decisions that take into account
economic, cultural, social, and political
determinants specific to each area.
E.P.7. Illustrate the reality of business
by using activities such as visits and
lectures given by executives or by
preparing case studies.
E.P.8. Be able to take functional
decisions within an organization with
international activity.
E.P.17. Be able to express oneself and
3


Competences for applicability

G.A.4. Ability to understand and apply
the network concept.

understand spoken and written
communication in English at an
advanced level to apply it to the
international business area.

The above abilities interrelated with the basic abilities set out in Royal Decree
1393/2007, namely:
a. Competence to understand knowledge, on the basis of general secondary
education
b. Competence to apply knowledge to day-to-day work in international
management and marketing, in particular, the ability to develop and defend
arguments and to solve problems
c. Competence to gather and interpret relevant data, making it possible to
issue reflective judgments on economic and social reality
d. Competence to communicate and transmit information (ideas, problems,
solutions) to a specialized and non-specialized public
e. Competence to develop learning activities in a relatively autonomous
manner.
Thus, the competences developed in the subject are structured into those that are
seen as a development or specification of basic competences and those that define
the professional profile of the graduate, with respect to general and specific
competences.

Basic competence: understanding of knowledge
General competence: G.I.3
Specific competences: E.D.8

Basic competence: application of knowledge
General competences: E.P.2

Basic competence: communicate and transform information
General competences: G.I.8
Specific competences: E.P.17

Basic competences: develop learning activities
General competences: G.I.3

Competences that define the professional profile which are not included under basic
competences
In general, these competences combine the following key elements for
professionalizing students in the area of international business and marketing:
a. Provide students with the capacity to adapt to dynamic teams and environments
b. Provide students with the capacity to create their own integral vision of the
operation of a business or international marketing project
c. Provide students with the capacity to take complex decisions and carry out
negotiation processes
General competences: G.I.5, G.P.1, G.S.4, G.S.7, G.S.8, G.A.4
Specific competences: E.P.5, E.P.7, E.P. 8
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Own competences of the subject

Understanding the fundamentals of how prices are set and the relationship of
pricing process with other functional business activities.


4. Contents

1. Costs
2. CVP Analysis
3. Markets and willingness to pay
4. Pricing discrimination
5. Pricing strategies
6. Value and pricing
7. Pricing psychology
8. Pricing over the product lifecycle
9. Competitive pricing
10. Ethical and legal issues in pricing
5. Assessment

Regular Term Evaluation

During the regular term you will be evaluated as indicated in the table below.

Assessm
ent
element
s
Frequ
ency
Type of
assessment
Assessment agent
Type of
activity
Grouping
Wei
ght
(%)
Oblig
atory
Option
al
Lec
tur
er
Self 360
Indi
vidu
al
Group
(#)
CONTINUOUS EVALUATION (Minimum 5.0 on simulation and 4.0 on overall continuous
evaluation grade required to be allowed to take the final exam)
Quizzes 2 X X
Applicati
on
Overall
underst
anding
X 20%
Simulati
on
1
X
(min.
50%)
X X X
Applicati
on
Concept
ual
Overall
underst
anding
X 3/group 20%
Seminar
preparat
ion and
participa
tion
9 X X X X
Analysis
Applicati
on
Concept
ual
Overall
underst
anding
X 20%
FINAL EXAM (Minimum 4.0 required to pass the course)
Final
exam
1
x
(min.
40%
)
X
Applica
tion
and
synthe
X 40%
5

sis
BONUS EVALUATION (default 0.0 maximum 1.0)
Participa
tion
bonus
grade
Ongoin
g
X X X X
Analysis
and
applicatio
n
X
10
%
bonu
s

a. Each assessment element (the first column) is scored with a grade between 0
and 10 with one decimal point precision. Zero is the lowest grade and ten is the
highest grade.
b. The final grade for the course is calculated by adding grades obtained in each
element multiplied by their assigned weights (the last column).
c. The final grade of the course is reported on the scale from 0 to 10 with one
decimal point precision. The course will be considered as passed if the final
grade is equal to or greater than 5.0.
d. In addition to numeric final grades, you are also given descriptive grades:
No presentat
0.0 4.9 Suspens
5.0 6.9 Aprovat
7.0 8.9 Notable
9.0 10.0 Excel.lent
e. Frequency column in the table indicates the number of times assessment
element is evaluated during the term.
f. The assessment elements that have x in the Obligatory column must be
completed with the grade that is equal or greater to indicated grade in order to
obtain a passing course grade. The assessment elements that have x in the
Optional column dont require a minimum passing grade in order to obtain a
passing final grade. Nevertheless, those Optional assessment elements that
are not completed still count towards your final course grade.

g. International students: Please DO NOT BOOK tickets for your flights home in
December before the dates for the final exams are announced (usually at the
end of the week 5). Even if you have a ticket and a valid reason, ESCI will NOT
PROVIDE ALTERNATIVE DATES for the final exam.

h. To be allowed to take the final exam your continuous evaluation grade (quizzes
+ simulation + seminar preparation and participation) must be 4.0 or greater
AND your simulation grade must be 5.0 or greater. If any on these two
conditions is not met, you will not be allowed to take the final exam and the
lower of the two grades becomes the final course grade.
i. In order to pass the course, you must take the final exam. If you do not take
the final exam, your final course grade will be No presentat (No show),
irrespective of your grades in other evaluation elements.
j. To obtain a passing course grade, you must obtain the final exam grade that is
equal to or greater than 4.0. If the final exam grade is less than 4.0, the final
exam grade becomes the course final grade irrespective of other grades.
k. The final exam is cumulative it covers all material covered during the term.
Quiz 1 includes only material covered before the Quiz 1. Quiz 2 includes only
material covered between Quiz 1 and Quiz 2.
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l. Seminar preparation and participation grading element evaluates your
preparation for the seminars. In addition to quality of your deliverables it
evaluates the level of your preparation. Missing seminars or coming unprepared
to classes will lower your grade for this evaluation element. Each student is
entitled to one joker seminar when a student is allowed to miss the class or
attend the class unprepared, AS LONG AS I am informed in writing about this
ahead of the class. The first time you come to a seminar class unprepared
without prior notification or you do this after using your joker seminar the
maximum grade for the seminar preparation and participation element will be
lowered by 25%; the 2
nd
time by 50%, and zero thereafter. Thus, if your actual
grade for this evaluation element is 7 and I determine that in addition to one
joker seminar you came to 2 seminars unprepared or that you came to 2
seminars unprepared without claiming in writing your joker seminar, your
recorded grade for this evaluation element will be 20*0.5*0.7 = 7.
m. If you fail to submit any of your assignments by the given deadline, and you are
late between 0 and 24 hours, your maximum assignment grade will be reduced
by 20%. If you are late more than 24 hours, the assignment will not be
accepted and your grade will be zero. For instance, if you submit your
assignment 10 hours late, your maximum possible assignment grade becomes
8. Thus, if your actual assignment grade is 7, your recorded assignment grade
is 0.7*8 = 5.6.
n. There will be neither individual make-up work nor extra credit work assigned if
you fail any of obligatory grading elements, you are unable to attend the final
exam or quizzes, or if you obtain a grade below your expectations.
o. All students in a group receive the same grade for any group work. However,
during the final exam, you will have to perform 360-degree evaluation that will
be used to adjust group grades for individuals who have contributed more than
their fair share of work (their grades will be higher than the grade given to the
rest of the group members) and those who didnt contribute their fair share of
work (their grades will be lower than the grade given to the rest of the group
members).
p. Participation in this course is evaluated as an extra credit that can contribute up
to 10% of your final grade (default is zero). If you dont say a word during the
classes or you have irregular attendance (below 80%), your participation grade
will be zero. However, you still may obtain a maximum final course grade.
Participation grade is based exclusively on your CONTRIBUTION during class
discussions. My experience is that in the courses that are evaluated on the
continuous basis like this one, it is hard to fail but it is also hard to obtain a very
high mark. So, if you are concerned with your average grade, take this element
seriously as it can compensate for losses of grades in other elements.
Furthermore, do not think of this grade as an entitlement or a gift it has to be
EARNED. Finally, do not confuse attendance with participation.
q. A student can have a perfect attendance record and still have zero participation
mark. Some of the behaviors that contribute to effective class participation are
captured in the questions that follow:
1. Is the participant a good listener?
2. Are the points that are made relevant to the discussion? Are they linked to
the comments of others?
3. Do the comments add to our understanding of the situation?
4. Do the comments show evidence of analysis of the case?
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5. Does the participant distinguish among different kinds of data (that is, facts,
opinions, beliefs, concepts, etc.)?
6. Is there a willingness to share?
7. Is there a willingness to test new ideas, or are all comments "safe"? (For
example, repetition of case facts without analysis and conclusions or a
comment already made by a colleague.)
8. Is the participant willing to interact with other class members?
9. Do comments clarify and highlight the important aspects of earlier
comments and lead to a clearer statement of the concepts being covered?
The questions above deal with both the process of class participation and (of
equal or greater concern) the content of what you say. Please trust that both
quality and frequency are important, but that quantity never can make up for
low quality.


Supplementary Evaluation

For those students who were allowed to take the final exam and during the regular
term evaluation have obtained a final grade below 5.0, there will be a
supplementary evaluation according to the ESCI calendar and academic
regulations.

Only final exam can be retaken during this session. All other grades stay unchanged
and cannot be compensated by extra work. To pass the supplementary evaluation
exam, a student must obtain supplementary exam grade that is equal or greater
than 4.0. If a student obtains a passing supplementary exam evaluation grade, the
final grade will be determined using the regular course assessment rules as outlined
above. If a student obtains the supplementary exam grade below 4.0, the
supplementary exam grade becomes the final course grade. Bonus participation
grade is set to zero if a student has to take supplementary evaluation.


Evaluation of the competences:

G.I.2. G.I.3. G.I.8. E.D.8. E.P.2. E.P.17. Profile
Class
Participation
X X X X X X
Simulation X X X X X X X
Seminar
preparation
&
participation
X X X X X X X
Quizzes X X X X X
Final exam X X X X X




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6. Bibliography and teaching resources

Basic bibliography
o Nagle T., Hogan, J., and Zale, J. (2010). The Strategy and Tactics of
Pricing: A Guide to Growing More Profitably (5
th
Ed.) Upper Saddle
River, NJ: Prentice Hall

Supplementary bibliography
o Baker, R. J. (2006). Pricing on Purpose: Creating and Capturing
Value. Hoboken, New Jersey: John Wiley & Sons
o Dolan, R. and Simon H. (1997). Power Pricing: How Managing Price
Transforms the Bottom Line. New York, NY: The Free Press [Dolan &
Simon]
o Wilson R. (1997). Nonlinear Pricing. New York, NY: Oxford
University

Teaching resources:
Posted on the course Intranet site:
o Supplementary teaching cases
o Power point slides
o Supplementary articles

Other:
o Supplementary video cases (web link provided when possible)
o Pricing simulation software (web link provided)

Students are required to read all assigned cases and articles. Although the course
will loosely follow Nagle and Holdens book listed in the bibliography section, there
is no required text book for this course. Above, listed are some of the books that
you might want to refer to during the course or after for further reading on the
topics covered during the class. Nevertheless, you will not need to buy or borrow
any of these books to successfully complete the course.


7. Methodology

The course is composed of a mixture of lectures, tutorials, seminars, simulations
and case discussions. The purpose of the lectures is to present and discuss
theories, concepts, analytical techniques and empirical findings. We will supplement
lectures with tutorials that will allow us to practice the analytical techniques
introduced during the lectures. Furthermore, we will discuss a number of
comprehensive business cases. The goal of the case discussion is to apply the
concepts to the context provided by the case and to make decisions based on both
qualitative and quantitative analysis.

These teaching methods require intensive students involvement and therefore it is
important that students read the assigned material prior to each class. As the class
is offered in English, all reading material will be provided in English only. Students
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will be provided with the cases, readings, exercises and power point presentations
either before or after the class via the Intranet site (Aula).






Face-to-face
(in the classroom)
Directed
(outside the
classroom)
Independent
(outside the
classroom)
Professor
- Lectures
- Tutorials
- Discussion of cases and
articles
- Prepare classes
- Prepare tutorials
- Prepare cases and
articles

Student
- Participation in
discussions
- Quizzes
- Final exam
- Prepare seminars
- Prepare cases and
articles
- Play simulation
- Class preparation and
readings
- Independent study
- Exam preparation


MY EXPECTATIONS:
Class Preparation: I expect you to come to classes prepared. This includes
reading of the assigned cases, articles, reviewing of the power point slides and
exercises. Your preparation will make a significant part of your marks in
participation and seminar preparation and participation evaluation elements. While
participation during the classes is predominantly voluntary, I also practice cold
calling. This means that anyone can be asked to answer any question. Fear of
public speaking will not be accepted as an excuse.

Punctuality and Deadlines: I expect you to be on time for classes. I understand
that due to unforeseen circumstances, you may be occasionally late. If possible,
please let me know in advance if you are going to be late. Being habitually late is a
good way of losing goodwill. Deadlines will always be strictly enforced and no
exceptions of any kind will be made without prior approval.

Attendance: I expect you to attend classes regularly. I understand that due to
unforeseen circumstances, you may be occasionally absent. If possible, please let
me know in advance if you are going to be absent. Being habitually absent and/or
being absent without a valid reason is a good way of losing goodwill. Being absent
does not excuse you from the deadlines. It is your responsibility to ensure that I
receive required material by the given deadline, in the specified format, even if you
are not present. If your attendance is below 80% (more than 4 absences), your
bonus participation mark is set to zero independent of your actual participation.

Class Discipline: It is of utmost importance that you respect your classmates and
the professor by allowing them to work and study in a professional environment.
Private conversations among students during the class will not be tolerated.
10

According to ESCI rules, the professor may ask student(s) to leave the classroom.
If you are asked to leave the classroom, your attendance sheet will be marked as
expelled (counts as two unjustified absences) and you will be asked to meet with
the program coordinator.

Intranet (Aula): It is students responsibility to ensure timely access to the
Aula.
1
International students: please talk to exchange program coordinators at your
school and at ESCI in order to obtain Aula access as soon as possible. Until you
obtain the access please ask one of your local classmates for the access to print or
copy the class materials. Not having the access to the Aula will not be accepted as
an excuse for not doing required course work.

Internet Enabled Devices: Students MUST bring some type of Internet Enabled
Device (e.g., laptop, tablet, or smart phone) to the class when instructed. Class
materials (cases, articles, and PP slides), quizzes and the simulation will be
available exclusively on-line. For the remainder of the class use of any of these
devices is allowed ONLY for the class related activities (e.g., taking notes). If you
are found to use these devices for any other purpose, especially for activities that
distract your classmates, you may be asked to leave the classroom.


YOUR EXPECTATIONS:
Responsiveness and Feedback: You should expect that questions and concerns
that you raise with me would be answered, addressed and responded to. Besides
formal feedback mechanisms, feel free to jot me an e-mail with any question or
feedback. I will try my best to respond as speedily as I possibly can.

If you need to talk to me, you can send me an e-mail requesting to meet during the
office hour or at other time. I will schedule time to sit and talk to you. Although I
am usually available before and after the class for impromptu questions and
consultations, unless you previously request to meet, you need to be prepared for
the possibility that I may ask you to postpone the conversation for another day due
to my previously scheduled obligations.

Punctuality: You should expect me to start and finish classes on time. If we need
extra time to cover materials, or need to organize an extra session, I will only do so
if the majority of the class agrees.

Preparation and Rigor: You should expect the most up-to-date and rigorous
materials to be covered in class.

Guidelines and Expectations: For all assignments, exams and other course
materials, I will state my expectations as clearly as possible.

If either of us finds that the other party has been violating expectations, it is our
duty to inform the other party as promptly, and in as fair a manner as possible.



1
https://aula.esci.upf.edu/login/index.php?lang=en
11

8. Scheduling activities

Note: Seminars are starting on Thursday, October 03, 2013

Week

Hours Sessions Date
Class
Preparation
Time In Class Time After Class Time
Week 0 0

Lecture 0

Monday,
Sep. 23
NA 0 No class 0 NA 0

Seminar
0

Thursday,
Sep. 26
NA 0 No class 0 NA 0
Week 1 5
Lecture 1
Monday,
Sep. 30
NA 0

Presentation 1: Course
introduction
Lecture 1: Costs

2

Review PP slides
Review your
notes
Independent
study

1
Seminar
1
Thursday,
Oct. 03
Read and
prepare the case
0.5

Case 1: Beauregard Textile
Company (HBS 191-058)
- Cost contribution analysis
- Competitive pricing

1
Review your
notes
Independent
study
0.5
Week 2 7.5 Lecture 2
Monday,
Oct. 07
Review PP slides
Read tutorial
questions
1

Lecture 2: CVP Analysis
Tutorial 1

2
Review PP slides
Review your
notes
Independent
study
1
12

Seminar
2
Thursday,
Oct. 10
Read and
prepare the case
2

Case 2: Heinz Ketchup -
Pricing the product line
(UV5142)
- Margins (regular and
promoted manufacturer
margins, regular and
promoted retail margins)
- Consumption-adjusted
margin
- Retail pass-through

1
Review your
notes
Independent
study
0.5
Week 3 7
Lecture 3
Monday,
Oct. 14
Review PP slides
Read tutorial
questions
1

Tutorial 2


2
Review your
notes
Independent
study
1
Seminar
3
Thursday,
Oct. 17
Read and
prepare the case
1.5

Case 3: Metabical - Pricing,
packaging, and demand
forecasting for a new weight-
loss drug (HBS Brief Case
4183)
- Pricing approaches (cost-
based pricing, demand-
oriented pricing,
competitive-oriented
pricing, target return
pricing)
- Product packaging
alternatives, fit with
consumer data, and possible
pricing strategies
1
Review your
notes
Independent
study
0.5
13

- Product pricing and
packaging decisions for a
new product when demand
and consumer behavior are
uncertain
- Forecasting demand of a
new product and estimating
profitability

Week 4 7
Lecture 4
Monday,
Oct. 21

Review PP slides
Read tutorial
questions

1 Tutorial 3 2
Review your
notes
Independent
study
1
Seminar
4
Thursday,
Oct. 24
Read and
prepare the case
1.5

Case 4: Culinarian Cookware:
Pondering price promotion
(HBS Brief Case 4057)
- Risks and opportunities of
price promotion as a
strategic and tactical
marketing tool
- Valuating the financial
impact of a price promotion
using different cost and
sales assumptions
- Developing price promotion
policy consistent with
overall marketing objectives

1

Review your
notes
Independent
study

0.5
Week 5 8.5 Lecture 5
Monday,
Oct. 28
Review PP slides
Read tutorial
questions
1

Lecture 3: Market and
willingness to pay: Demand,
supply, and elasticity
2

Review PP slides
Review your
notes
2
14

Tutorial 4

Independent
study
Familiarize
yourself with the
simulation

Seminar
5
Thursday,
Oct. 31
Read and
prepare the case
2

Case 5: Pepita Disco PPM
Margins and elasticity
(KEL692)
- Calculating and explaining
changes in net margin
- Calculating price and
volume changes for a given
price elasticity

1
Review your
notes
Independent
study
0.5
Week 6 15
Lecture 6
Monday,
Nov. 04

Prepare for the
quiz
Review PP slides
6
Quiz 1
Lecture 4: Pricing
discrimination
2

Review PP slides
Review your
notes
Independent
study
Play the
simulation

4
Seminar
6
Thursday,
Nov. 07
Read and
prepare the case
1.5

Case 6: The Springfield
Noreasters: Maximizing
Revenues in the Minor
Leagues (HBS Brief case
2510)
- Design, implementation,
and interpretation of
research surveys
1
Review your
notes
Independent
study
0.5
15

- Using quantitative analysis
methods to develop a
scaled pricing strategy for
a perishable service
- Impact on sales of auxiliary
products

Week 7 11
Lecture 7
Monday,
Nov. 11
Review PP slides
Read tutorial
questions
1
Tutorial 5
Lecture 5: Pricing strategies
2

Review PP slides
Review your
notes
Independent
study
Play the
simulation

4
Seminar
7
Thursday,
Nov. 14
Read and
prepare the case
2.5

Case 7: Virgin Mobile USA -
Pricing for the very first time
(HBS 504-028)
- Pricing when entering new
markets
- Pricing and customer
relationship management
(CRM)

1
Review your
notes
Independent
study
0.5
Week 8 8 Lecture 8
Monday,
Nov. 18
Review PP slides 1
Lecture 5: Pricing strategies
Lecture 6: Value and pricing
2
Review PP slides
Review your
notes
Independent
study
Write simulation
report
2
16

Seminar
8
Thursday,
Nov. 21
Read and
prepare the case
1.5
Case 8: Atlantic Computer
A bundle of pricing options
(HBS Brief Case 2078)
- Value-in-use pricing
1
Review your
notes
Independent
study
0.5
Week 9 8
Lecture 9
Monday,
Nov. 25
Review PP slides 1

Lecture 7: Pricing psychology
Lecture 8: Pricing and
product lifecycle
2
Review PP slides
Review your
notes
Independent
study
1
Seminar
9
Thursday,
Nov. 28
Read and
prepare the case
2.5
Case 9: XM Satellite Radio A
(HBS 504-009)
- Skimming vs. penetrating
pricing
- Pricing complementary
products
- Reacting to competitive
pricing
- Price promotions
1
Review your
notes
Independent
study
0.5
Week
10
11
Lecture
10
Monday,
Dec. 02
Prepare for the
quiz
Review PP slides
Read and
prepare the case
8

Quiz 2
Lecture 9: Auctions

Case 10: Biopure Corporation
(HBS 599-094)
Going to market
- Relative market potential
- Reference pricing

2
Review PP slides
Review your
notes
Independent
study
1
NA NA NA 0 NA 0 NA 0
17

Exam
Week
12 Exam TBD

Prepare for the
final exam

10 Exam 2 NA 0
Total
Hours
100 46.5

31

22.5
Last updated: August 11, 2013
9. Case preparation questions

Below you may find a list of cases with matching preparation questions. Once you read the case use these questions for seminar
preparation that you can do either individually or in groups of three. Unless explicitly indicated before the seminar class you don-t have to
submit anything in writing.

Case 1: Beauregard Textile Company (HBS 191-058)

1. Should BTC announce a price of $3.00 or $4.00 per yard for T-30? Why? Calculate it!

To answer this question you will have to perform relevant cost analysis and demand analysis from the BTCs and C&Ps perspective.
Please follow the instructions:
a) of the costs identified in the case decide which ones are relevant
b) do the analysis for the following pricing scenarios prices, production quantity in yards, relevant costs, contribution margin per
yard, and profit (these should be rows in your table)

Cas
e
BTC @
$4.00
BTC @
$3.00
BTC
when
both @
$4.00
C&P @
$3.00
C&P
when
both @
$4.00
C&P
when
both @
$3.00

2. C&P is presumably showing a loss at $3.00. Why it is not increasing price?
3. How can BTC persuade C&P to raise its price without violating the antitrust laws which prohibit collusion on pricing between
competitors?


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Case 2: Heinz Ketchup - Pricing the product line (UV5142)

1. How profitable are the current SKUs in the product line for both Heinz and for retailers? Consider the profitability of both regular and
promotional prices on a dollar and percentage basis.
2. What is the current retail pass-through for Heinzs 24- and 36-oz. sizes? Do these numbers surprise you? (Retail pass-
through is a measure of how the dollars that manufacturers allocate for trade promotions are converted into retail promotional
dollars. This measure is often expressed as a percentage of trade promotional dollars. For example, if a manufacturer reduces
the unit price of an item by $1.00 during a trade promotion, and the retailer then reduces its price by $0.50 during the promotional
period, retail pass-through is said to be 50%.)
3. What are the consumption-adjusted margins, both for Heinz and for retailers, of the SKUs currently offered? Consider both regular
and promotional prices. (Consumption-adjusted margins are dollar margins that reflect the fact that different package sizes of the same
product may influence the rate at which customers consume the product. A natural question that arises from this phenomenon is how
product managers should adjust their understanding of product profitability to reflect this possibility. Here is one simple way: Suppose a
manufacturer makes $0.20 on a 10-oz. can of soup and $0.40 on a 20-oz. can of soup. In either case, the manufacturer makes $0.02
per ounce. But in this case, the larger size causes consumers to increase their consumption of soup by 30%, so the consumption-
adjusted margins per ounce of the 20-oz. size can be calculated as ($0.40 1.3) 20 = $0.026, where the term in parentheses adjusts
the dollar margin up to reflect the consumption expansion, and then that adjusted margin is divided by the number of ounces in the
package size. This per-ounce margin is now directly comparable to the per-ounce margin of the 10-oz. size: $0.02. In this case, Heinz is
making more money on the larger package size.)
4. How did consideration of consumption expansion inform your pricing and promotional plan? (A natural thing to do is to consider what
we would need to do in terms of trade dealing to make customer purchases of larger sizes make sense for retailers and make sense
for Heinz. Start by considering the 46-oz. size. What level of trade dealing would be best given your beliefs about retail pass-through
and an analysis of the margins and consumption-adjusted margins for Heinz as well as for retailers? What about the 64-oz.
size?)
5. Are there other sizes we should consider promoting?
6. Are there SKUs we should consider adding or removing from the current ketchup product line?
7. Beyond price, how would you promote this new pricing and product mix strategy to retailers and to consumers?

Case 3: Metabical - Pricing, packaging, and demand forecasting for a new weight-loss drug (HBS Brief Case 4183)

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1. How does Metabical compare to current weight-loss options?
2. What are the pros and cons of the forecasting methods presented by Printup? If you had to estimate demand for
this product, how would you go about it? What would your demand (unit) forecast look like for the first five years?
3. What considerations should be taken into account when making decisions about the package count? What package size
would you recommend?
4. What pricing strategy approaches would you suggest Printup explore? What are the advantages and
disadvantages of each strategy? What price would you recommend?
5. What impact does your pricing decision have on profitability? What is the ROI over the first five years for each of the
pricing strategies identified?





Case 4: Culinarian Cookware: Pondering price promotion (HBS Brief Case 4057)

1. Describe consumer behavior in the cookware market. How is cookware bought? How is it sold? What are the
implications for Culinarians marketing strategy?
2. What are Culinarians strengths and weaknesses? Why has the company been successful?
3. Was the 2004 promotion profitable? Calculate the profitability using Browns logic and then calculate profitability using the
consultants model. How would you calculate profitability?
4. Should Culinarian run a 2007 price promotion? If so, what should be the specifics of such a promotion (e.g., product
scope, discount rate, timing, communication)? If a price promotion is not suitable, think about another type of sales
promotion (e.g., manufacturer rebate program, gift with purchase, sweepstakes, product placement, etc.) to recommend.


Case 5: Pepita Disco PPM Margins and elasticity (KEL692)

1. What would be the absolute and percentage changes in net margin if Pepita Disco were to:
a) Reduce research and development 10%?
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b) Reduce marketing and advertising 10%?
c) Reduce all fixed costs 10%?
d) Reduce all variable costs 10%?
e) Get its salespeople to sell 10% more?
f) Raise its price 10%?
g) Lower its price 10%?
h) Reduce research and development 10% and, as a result, unit sales decreased 5%?
i) Reduce marketing and advertising 10% and, as a result, unit sales decreased 5%?
j) Reduce variable costs per unit 10% and, as a result, unit sales decreased 10%?
k) Motivate its manufacturing staff and salespeople by paying them 10% more and, as a result, unit sales increased 10%?
l) Raise its price 10% with an elasticity of -1.7?
m) Lower its price 10% with an elasticity of -1.7?
2. What would be the absolute and percentage effect on net margin if Yuckles were to:
a) Raise its price 10% with an elasticity of -1.7?
b) Lower its price 10% with an elasticity of -1.7?
Case 6: The Springfield Noreasters: Maximizing Revenues in the Minor Leagues (HBS Brief case 2510)

1. Evaluate the research survey undertaken by the League Sports Association and by Larry Buckingham, Noreasters
marketing director. Consider each step in the process that led to the findings of the survey.
2. What do you consider to be the key findings of the research survey? Comment on what Buckingham learned
about a prospective customer profile, pricing, and single-ticket versus season-ticket packages.
3. What considerations should the Noreasters take into account in establishing a pricing policy?
4. Design a ticket pricing plan for the Noreasters first season. Be very specific, and be prepared to explain the
assumptionsespecially assumptions of cause and effectthat underlie your strategy. Should Buckingham offer
more than one type of season package? How, if at all, should ticket pricing vary by package type? How, if at all, can
Buckingham take advantage of consumer interest in grandstand seating?
5. Using the pricing plan you have designed and given Buckinghams assumptions about concession sales, will the
team reach breakeven in the first year? If not, what options does Buckingham have to reach his target?

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Case 7: Virgin Mobile USA - Pricing for the very first time (HBS 504-028)

1. Which of the offered pricing options would you chose and why? You need to use numbers from the case in the calculations below in
order to justify your answer.
a) How big is industrys annual churn rate with and without contract?
b) What are the components of the industrys acquisition cost and how big they are?
c) How big is industrys ARPU?
d) Assuming that the industrys acquisition cost is $740, how long does it take to break even?
e) What is industry customers LTV with and without contract assuming that interest rate is 10%? Exhibit 11 gives you the formula
you need to use. Use acquisition cost of $185. Other numbers you need you may find in the case.
2. What would be the industrys break even time and LTV with and without contract if the hidden costs would be eliminated?
3. What is Virgins most likely acquisition cost and customer LTV (assume interest rate 5% and monthly revenue and monthly cost to
serve equal to its competitors)?
4. There is very little loyalty in the cellular industry. What do you think is the source of this dissatisfaction? Why havent the big carriers
responded more aggressively to customer dissatisfaction?
5. How do major carriers make money in this industry? Is there a financial logic underlying their pricing strategy?
6. What do you think of Virgin Mobiles value proposition (the VirginXtras, etc.)?
7. What do you think of its channels and merchandising strategy?
8. Do you agree with Virgin Mobiles target market selection? What are the risks associated with targeting this segment? Why have the
major carriers been slow to target this segment?
9. What price per minute should Virgin charge? What assumptions you need to make to answer this question?


Case 8: Atlantic Computer A bundle of pricing options (HBS Brief Case 2078)

1. What price should Jowers charge DayTraderJournal.com for the Atlantic Bundle (i.e., Tronn servers+PESA software tool)?
2. Think broadly about the top-line revenue implications from each of the four alternative pricing strategies. Approximately how much
money over the next three years will be left on the table if the firm were to give away the software tool away for free (i.e., status
quo pricing) versus utilizing one of the other pricing approaches?
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3. How is Matzer likely to react to your recommendation?
a) How is Cadenas sales force likely to react to your recommendation?
b) What can Jowers recommend to get Cadenas hardware-oriented sales force to understand and sell the value of the
PESA software effectively?
4. How are customers in your target market likely to react to your recommended pricing strategy? What response can be
provided to overcome any objections?
5. How is Ontario Zinks senior management team likely to react to the Atlantic Bundle?


Case 9: XM Satellite Radio A (HBS 504-009)

1. What is the vale proposition of XM to different consumer segments? Who should be the primary target market for XM?
2. What aspects need to be considered in pricing the radio receiver and subscription fee? What is the optimal price for monthly
subscription? Assume a five-year lifetime for a customer. How would you answer change if the lifetime was longer or shorter?
3. How should the price of the service change over time? Should you price high initially and then decrease it over time? Should you price
low initially and then increase it over time?
4. What aspects need to be considered in allowing advertising to run on XMs service? How does the fact that the firm could also earn
money on advertising affect the optimal subscription price?
5. What are the implications of the expected launch plans for XMs rival Sirius?
6. What revenue models should Robert Acker recommend that XM pursue to capture value from satellite radio?
7. Given the business model selected, what should the marketing plan for launching the XM service be? (Communication strategy,
channel design, pricing and incentives).


Case 10: Biopure Corporation (HBS 599-094)

1. What would you do? Give at least three reasons for launching and three for not launching Oxyglobin now.
2. Estimate the size of animal market potential (in units and in dollars). Calculations are expected.
3. Assuming that the Biopure decides to launch the Oxyglobin immediately, what price would you suggest and why? Calculations are
expected.